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Sunday, 14th April 2024
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A ‘first world’ economy and finance sector Back  
International Monetary Fund managing director, Rodrigo de Rato, has defined four criteria for a country to have a first world economy. The first is transparency in policy making, the second is a strong financial sector, the third is well developed capital markets and the fourth is a flexible foreign exchange policy.
As is clear from a reading of the ‘FINANCE Guide to Corporate Treasury 2005’ which is published alongside this issue, Ireland, as a member of the Eurozone, fulfils the third and fourth criteria.

With respect to the second, having a strong financial sector, while Ireland’s financial services sector might not quite yet be described as perfect, it certainly could be said to be ‘strong’. (With regard to perfectability, Professor Ray Kinsella offers some advice to the Irish industry on page 4).

However on the first requirement – transparency in policy making - Ireland falls down. This is the drift of the criticism made of the Budgetary tax planning process in this month’s edition of the KPMG Tax Monitor (see page 8 of this issue). The importance of an efficient, inclusive, representative policy making mechanism cannot be understated to the success of an economy.

Writing ahead of this year’s Budget, Brian Daly, editor of the Tax Monitor, questions the process of how the public services sector provides its advice to the Minister for Finance. Unlike that tendered by the ‘social partners’, which is available freely for interested parties to read, the public service offers its advice in private.

Says Daly, ‘We are not told until after Budget day what advice is tendered to the Minister. Even then the veil is only partially lifted with some only of the minutes of the Tax Strategy Group (a Civil Service think tank on Budgetary matters) being published following the Budget. There is thus limited opportunity for those likely to be affected to comment on the Public Service proposals. Those with viewpoints that differ from those held in the Public Service, or with specialist expertise that may exceed that available in the Public Service, have little or no opportunity to make their views known to the Minister before he decides on whether or not to follow Public Service advice. This is a poor system’.

As the regulatory/compliance burden continues to grow on an international/EU level, it will become increasingly important that Irish policy making gets the balance right between public interests and industry needs This can only be achieved through a transparent, consultative policy making process, which is why the recent publication of the Irish Financial Services Regulatory Authority’s (IFSRA) ‘Strategy for 2005’ (see page 3) is a welcome step.

In the document, IFSRA sets outs its priorities for the coming year, and outlines how it intends to achieve each of its goals, offering an ideal platform for industry to respond to the single regulator on areas of concern.
Meanwhile, as we report elsewhere on this page, Ireland’s ‘best ever minister for Finance’ (see Finance September) has got off to an encouraging start in his mission as Europe’s ‘Commissioner for finance’, in statements in his confirmatory hearings that reveal an awareness of the regulatory fatigue now facing the European financial services industry.

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